US stocks hover near record highs at the start of the 2nd half of 2021, but the Delta variant knocks Asian equities and boosts the dollar

• US stocks traded near record-highs on Thursday, while Asian markets dipped on worries over the Delta variant.
• But according to JPMorgan, the variant’s spread doesn’t pose a risk to the stock market.
• The S&P 500 recorded one of its strongest first-half performances in 23 years this year.
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US stocks hovered near record-highs on the arrival of the second half of the year on Thursday, but investor sentiment that has been dampened by the spread of the Delta variant put Asian markets on a weaker footing.

Futures on the Dow Jones, and Nasdaq rose between 0.2% and 0.4%, suggesting a higher start to trading later in the day. The S&P 500 rose 0.3%. The index is up 14% year-to-date, the second-biggest gain for the first half of the year since 1998.

Data suggests the highly infectious variant may be the most common strain in the US, leading many to question how well the economy will continue to fare. But the spread doesn’t pose a direct risk to equities, and could instead drive a rebound in value stocks and bond yields, JPMorgan said in a note on Wednesday.

US private payrolls data released by the ADP beat expectations on Thursday, rising by 692,000 in June. Economists polled by Bloomberg held a median estimate of a 600,000 payroll gain. But traders think the government’s own jobs report on Friday could jostle markets from a slumber, according to Reuters.

The dollar index advanced ahead of US labor data, after having gained 2.6% in June – its biggest monthly rise since March 2020.

In Europe, the UK recorded more than 26,000 new COVID-19 cases on Wednesday, the biggest daily rise since late January. However, one bright spot so far is hospitalizations and deaths are far more subdued than in the spike in infections at the start of the year, Deutsche Bank analysts said.

Inflation in the UK may be the defining economic theme of the post COVID-19 recovery with important consequences for both monetary and fiscal policy, Sanjay Raja, senior economist at Deutsche Bank, said on Thursday.

London’s FTSE 100 rose 1.2%, the Euro Stoxx 50 rose 1.1%, and Frankfurt’s DAX rose 1.1%.

Asian equities all traded lower on Thursday, while markets in Hong Kong were closed for a holiday. President Xi Jinping marked the 100th anniversary of the Chinese Communist Party’s founding in a speech Thursday, noting the country’s quest to gain control of Taiwan was a “historic mission” and an unshakable party commitment. His address did little to calm geopolitical nerves as the Shanghai Composite fell 0.07% and Tokyo’s Nikkei fell 0.2%.

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